Item 1. Financial Statements (unaudited)
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Balance Sheets
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November
30,
2018
$
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February
29,
2018
$
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Unaudited
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Audited
|
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ASSETS
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|
|
|
|
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Cash
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6,923
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|
|
697
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Notes
receivable, related party
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—
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235,752
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Trade
account
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299,000
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Prepayments
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1,525,625
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—
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Total Current Assets
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1,831,548
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|
236,449
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Intellectual
Property including formulations
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6,000,000
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—
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Total
Assets
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|
|
7,831,548
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|
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|
236,449
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LIABILITIES
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Current Liabilities
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Accounts
payable and accrued liabilities
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933,131
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518,310
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Due
to related parties
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352,057
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277,219
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Current Liabilities
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1,285,188
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|
795,529
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Convertible notes payable,
net
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—
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415,581
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Derivative
liability, Typenex Note
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—
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|
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390,009
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Total
Liabilities
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|
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1,285,188
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|
|
1,601,119
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STOCKHOLDERS’
DEFICIT
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Common
Stock
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Authorized:
990,000,000 common shares, par value of $0.001 per share
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Issued
and outstanding: 30,810,346 and 34,171 common shares respectively
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30,810
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34
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Issued
and outstanding Preferred shares
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Series
B – 2,000,000
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—
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200
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Series C – 995,600
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100
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|
100
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Additional paid-in
capital
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29,959,705
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17,785,335
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Accumulated
deficit during the development stage
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(23,444,255
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)
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(19,150,339
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)
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Total
Stockholders’ Equity (Deficit)
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6,546,360
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(1,364,670
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)
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Total
Liabilities and Stockholders’ Equity
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7,831,548
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236,449
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(The accompanying notes are an integral
part of these financial statements)
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Operations - Unaudited
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3 Months Ended
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9 Months Ended
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Nov. 30, 2018
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Nov. 30, 2017
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Nov. 30, 2018
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Nov. 30, 2017
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Income Statement
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Revenues
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—
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—
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—
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—
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Cost of Sales
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—
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—
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—
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—
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Gross Profit
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—
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—
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—
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—
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Operating expenses
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Amortization expense
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—
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—
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—
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—
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Product development expense
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—
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—
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—
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—
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Sales and marketing expenses
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—
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—
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—
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—
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Operations expense
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1,401,801
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—
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1,401,801
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—
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General and administrative
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57,233
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|
30
|
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57,278
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|
406
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Professional fees
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152,939
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—
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152,939
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—
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Lease operating expenses
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—
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|
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—
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—
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—
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Total operating expenses
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1,611,973
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|
30
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1,612,018
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|
406
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Loss before other expenses
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(1,611,973
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)
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(30
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)
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(1,612,018
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)
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(406
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)
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Other income (expense)
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Interest Income
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2
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—
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2
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—
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Interest Expense
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—
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(21,271
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)
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(49,442
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)
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(60,831
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)
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Settlement expenses
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(1,518,920
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)
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—
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(1,650,170
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)
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—
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Gain (Loss) on currency conversion
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(11,000
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)
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—
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(11,000
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)
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|
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—
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Gain (loss) on derivative liability
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254,128
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|
20,957
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—
|
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|
248,336
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Total other income (expense)
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|
(1,275,790
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)
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|
|
(314
|
)
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(1,710,610
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)
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|
187,505
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Net profit (loss)
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(2,887,763
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)
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(344
|
)
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(3,322,628
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)
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|
187,099
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|
Basic and diluted loss per common share:
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Income (loss) from continuing operations
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(0.19
|
)
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|
(0.01
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)
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|
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(0.67
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)
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|
6.02
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Basic and diluted loss per common share
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|
($
|
0.19
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)
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|
($
|
0.01
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)
|
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($
|
0.67
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)
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$
|
6.02
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Weighted average shares outstanding - basic and diluted
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15,046,358
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|
31,067
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4,971,644
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31,067
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(The accompanying notes are an integral
part of these financial statements)
PHOENIX LIFE SCIENCES INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
(Unaudited)
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9 Months Ended
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Nov. 30, 2018
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Nov. 30, 2017
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|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
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|
|
|
|
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Net profit (loss)
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|
(3,322,638
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)
|
|
|
187,099
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Loss from discontinued operations
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—
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—
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Adjustments to reconcile net loss to net cash used in operating activities:
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Non-cash stock compensation
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3,726,855
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—
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Non-cash interest expense on convertible notes payable
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|
49,442
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|
|
|
60,831
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|
Debt issuance costs
|
|
|
5,283
|
|
|
|
—
|
|
Non-cash loss (gain) on derivative liability
|
|
|
—
|
|
|
|
(248,336
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)
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Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
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Accounts receivable
|
|
|
—
|
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|
|
—
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Deposit
|
|
|
—
|
|
|
|
—
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Trade account
|
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|
(299,000
|
)
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|
|
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Prepaid expense and deposits
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|
(1,025,625
|
)
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|
—
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Accounts payable and accruals
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|
316,231
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|
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—
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Net Cash provided by (used for) operating activities
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(549,442
|
)
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|
|
(406
|
)
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|
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CASH FLOWS FROM INVESTING ACTIVITIES:
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|
|
|
|
|
|
|
|
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|
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Related party notes receivable
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|
|
—
|
|
|
|
—
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Net Cash provided by (used in) Investing Activities - continuing operations
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|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
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CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Proceeds from loans
|
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|
23,427
|
|
|
|
—
|
|
Due to related parties
|
|
|
—
|
|
|
|
—
|
|
Proceeds from issuance of common shares
|
|
|
532,241
|
|
|
|
—
|
|
Net Cash Provided By Financing Activities - continuing operations
|
|
|
555,668
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash - continuing operations
|
|
|
6,226
|
|
|
|
(406
|
)
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period - continuing operations
|
|
|
697
|
|
|
|
1,155
|
|
Cash - End of Period - continuing operations
|
|
|
6,923
|
|
|
|
749
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
|
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|
|
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|
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|
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Interest paid
|
|
|
—
|
|
|
|
—
|
|
Income tax paid
|
|
|
—
|
|
|
|
—
|
|
Non-cash issuance of stock for consulting agreements
|
|
|
2,076,685
|
|
|
|
—
|
|
Non-cash issuance of stock settlement agreements
|
|
|
1,650,170
|
|
|
|
—
|
|
Non-cash issuance of stock for distribution agreement
|
|
|
—
|
|
|
|
—
|
|
Non-cash issuance of stock for conversion of debt
|
|
|
5,283
|
|
|
|
—
|
|
(The accompanying notes are an integral part
of these financial statements)
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1.
|
Nature of Operations and Continuance of Business
|
The company was incorporated in the State
of Nevada on April 21, 2009 under the name Mokita Exploration, Ltd. (the “Company”). On February 27, 2017, there was
a change of control of the Company. On February 28, 2017, our board of directors and a majority of holders of the Company’s
voting securities approved a change of name of the Company to MediJane Holdings Inc. A Certificate of Amendment to effect the change
of name was filed and became effective with the Nevada Secretary of State on March 4, 2017. A Certificate of Correction was subsequently
filed with the Nevada Secretary of State on March 6, 2017 to correct a spelling error in the Company’s new name. These amendments
have been reviewed by FINRA and were approved for filing with an effective date of March 12, 2017. The name change became effective
with the Over-the-Counter Bulletin Board at the opening of trading on March 12, 2017 under our new ticker symbol “MJMD”.
On March 8, 2017 the Company filed an Amendment
to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result of the Amendment,
the Company changed its name with the State of Nevada from MediJane Holdings, Inc. to Stem Bioscience, Inc.
In May 2018, the Company again changed its
name to Phoenix Life Sciences International Limited. A Certificate of Amendment to effect the change of name was filed and became
effective with the Nevada Secretary of State on May 31, 2018. The name change was accepted by FINRA and became effective with the
Over-the- Counter Bulletin Board on November 2, 2018 with the trading symbol “PLSI”.
In September 2018, the Company completed
a merger and consolidation with Phoenix Life Sciences International Limited (Canada) and related Phoenix Life Sciences International
Limited (Vanuatu) became a wholly owned subsidiary. As part of the consolidation, the Series B Preferred Shares owned by Phoenix
Bio Pharmaceuticals that were previously authorized to be cancelled were finally cancelled. Phoenix Life Sciences International
Limited (Nevada) had entered into asset purchase agreements with Phoenix Life Sciences Inc, Phoenix BioPharmaceuticals Corporation,
Phoenix Pharms Capital Corporation and Phoenix Pharms Inc to consolidate all assets, liabilities, trade secrets, knowhow, diagrams
and business plans, as well as all government relationships and pending contracts. Other than as specifically negotiated with former
employees, contractors and officers, all shareholders were provided with a share exchange whereby they received one share of the
Company for one share previously owned in one of these Companies.
Pursuant to the Agreement and Plan of Merger,
dated as of September 18, 2018 as (The “Merger Plan” by and between Phoenix Life Sciences International Limited, a
Nevada Corporation (the “Company”) and Phoenix Life Sciences International Limited, a Canadian Corporation (“PLSI
CA”), the Company completed its merger with PLSI CA, with the Company as the surviving entity.
On September 18, 2018, the Company’s
Board of Directors announced the finalized consolidation activities of Phoenix Life Sciences International Limited with Stem Biosciences,
Inc., Blue Dragon Ventures, and the MediJane Brand, and that the Company’s common stock would trade publicly under the symbol
MJMD, subsequently on November 2, 2018 this changed to PLSI.
Phoenix Life Sciences International Limited
(Canada) and Phoenix Life Sciences International Limited (Nevada) commenced the consolidation of business in 2018. During that
time, affiliates of the Company provided certain working capital and covering of costs related to the consolidation. Subsequently
the Company has entered into subscription agreements with certain affiliates and key non-affiliate investors to provide a total
of approximately USD $2.1million of financing. Shares of common stock issued for this total financing represent approximately 800,000.
The key non-affiliate investor who had previously entered into a subscription agreement to purchase USD $20 million of shares at
$10 per share with Phoenix Life Sciences International Limited (Canada) has entered into an agreement to exchange the subscription
for warrants to purchase Company common stock at a price of $10, with the purchases to be completed by December 31, 2019.
Further, as part of the merger and consolidation,
Phoenix Life Sciences International Limited (Canada) and Phoenix Life Sciences International Limited (Nevada) entered into settlement
agreements with former investors, employees and contractors whereby their debt, shares held in entities subject of the consolidation,
or outstanding amounts were settled in exchange for a full release of claims and the Company issuing approximately eight (8) million
shares and the assumption of approximately $2 million of settlements payable. The purpose of the consolidation, in addition to
providing the deemed necessary relationships and contracts for the Company to execute on its strategy, was to settle any potential
claim or liability to ensure that the Company was not subject to any claims by former investors, employees and contractors.
On September 22, 2018, the Company’s
Board of Directors accepted the resignation of Russell Stone from his position as a Director.
On October 3, 2018, the following persons
were appointed to the Board of the Company, Stephen Cornford, Martin Tindall as Chief Executive Officer, Janelle Marsden as Managing
Director and Geoffrey Boynton as Chief Financial Officer. Lewis “Spike” Humer stepped down from his executive role
but remains a Director.
The Company follows the accounting guidance
outlines in the Financial Accounting Standards Board Codification guidelines. The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted principles for interim financial information and with the items
under Regulation S-K required by the instructions to Form 10-Q. They may not include all information and footnotes required by
United States generally accepted accounting principles for complete financial statements. However, except as disclosed here in,
there have been no material change in the information disclosed in the notes to the financial statements for the year ended February
28, 2018 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on April
22, 2019. The interim unaudited financial statements presented herein are condensed and should be read in conjunction with those
financial statements included in the Form 10-K. The interim disclosures generally do not repeat those in the annual statements.
Management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been
made, and a statement that all adjustments are of a normal recurring nature or a description of the nature and amount of any adjustments
other than normal recurring adjustments. Operating results for nine months ended November 30, are not necessarily indicative results
that may be expected for the year ended February 28, 2019.
Going Concern
These financial statements have been prepared
on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the
normal course of business. The Company’s total operating expenditure plan for the following twelve months will require significant
cash resources to meet the goals of its business plan. The continuation of the Company as a going concern is dependent upon the
continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary
debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise
substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include
any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
|
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation –
The financial
statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US
GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is February 28 or 29.
Basis of Consolidation
– The
consolidated financial statements include the accounts of Phoenix Life Sciences International Limited. All significant intercompany
balances and transactions have been eliminated in consolidation.
Stock Split
– On October 21, 2015 the
Company’s Board of Directors declared a 1 for 10,000 reverse stock split on its common stock as of a record date of October
22, 2015. The effect of the stock split decreased the number of shares of common stock outstanding from 501,242,594 to 50,125.
All common share and per common share data in these financial statements and related notes here to have been retroactively adjusted
to account for the effect of the stock split for all periods presented. The total number of authorized common shares on the par
value thereof was not changed by the split.
Use of Estimates –
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses
that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.
A significant item that requires management’s
estimates and assumptions is the valuation of intangible assets, valuation allowances for income tax, valuation of derivatives
instruments and accrued liabilities, among others. Although management believes these estimates are reasonable, actual results
could differ from these estimates.
Cash and cash equivalents –
The Company
considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
At November 30, 2018 and February 28, 2018, the Company did not hold any cash equivalents.
Accounts receivable –
Accounts
receivable consists of trade accounts arising in the normal course of business. No interest is charged on past due accounts. Accounts
receivable are carried at the original invoice amount less a reserve for doubtful receivables based on a review of all outstanding
amounts on a monthly basis.
Basic and Diluted Net Loss per Share –
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation
of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by
dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury
stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At February 28, 2018 and November 30, 2018,
the Company had outstanding stock options outstanding, the Company does not deem these options to be dilutive as the exercise price
exceeds the current fair market value of the Company’s common stock. At November 30, 2018 and 2017, the Company had did not
have potentially dilutive shares outstanding.
Financial Instruments –
Pursuant to
ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level 1 –
Level 1 applies to assets
or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 –
Level 2 applies to assets
or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable
or can be derived principally from, or corroborated by, observable market data.
Level 3 –
Level 3 applies to assets
or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts receivable, accounts payable and accrued liabilities, amounts due to related parties, and
convertible debenture. Pursuant to ASC 820, the fair value of our financial instruments are determined based on “Level 1”
inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our
other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Derivative Financial Instruments –
The
Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
The Company reviews the terms of the common
stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded
conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances
where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required
to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially
recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income
or expense. The Company uses a Black-Scholes model for valuation of the derivative. When the equity or convertible debt instruments
contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received
are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated
to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.
The discount from the face value of the convertible
debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges
to interest expense, using the effective interest method.
Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether net cash settlement of the derivative instrument could be required
within the 12 months of the balance sheet date.
Comprehensive Loss –
ASC 220,
Comprehensive
Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.
As at November 30, 2018 and 2017, the Company has no items that represent a comprehensive loss and, therefore, has not included
a schedule of comprehensive loss in the financial statements.
Stock-based Compensation –
The Company
records stock-based compensation in accordance with ASC 718,
Compensation – Stock Based Compensation
and ASC 505-50
-
Equity-Based Payments to Non-Employees
. All transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of
the equity instrument issued, whichever is more reliably measurable.
The fair value of each share based payment
is estimated on the measurement date using the Black-Scholes model with the following assumptions, which are determined at the
beginning of each year and utilized in all calculations for that year:
Risk-Free Interest Rate.
We
utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards.
Expected Volatility.
We
calculate the expected volatility based on a volatility index of peer companies as we did not have sufficient historical market
information to estimate the volatility of our own stock
.
Dividend Yield.
We have
not declared a dividend on its common stock since its inception and have no intentions of declaring a dividend in the foreseeable
future and therefore used a dividend yield of zero.
Expected Term.
The expected
term of options granted represents the period of time that options are expected to be outstanding. We estimated the expected
term of stock options by using the simplified method. For warrants, the expected term represents the actual term of the
warrant.
Forfeitures.
Estimates of
option forfeitures are based on our experience. We will adjust our estimate of forfeitures over the requisite service period based
on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures
will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation
expense to be recognized in future periods
.
Revenue Recognition –
The Company
adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for
reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported
in accordance with legacy GAAP. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue
streams; as such, no cumulative effect adjustment was recorded.
Shipping and Handling costs –
Shipping
and handling costs are included in cost of sales in the Statements of Operations.
Recent Accounting Pronouncements –
The recent accounting pronouncements did not have any material impact on the financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
Reclassifications –
Certain amounts
in the prior period financial statements have been reclassified to conform with the current period presentation. These reclassifications
had no effect on previously reported losses, total assets or stockholders equity.
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3.
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Variable Interest Entity
|
The Company follows the guidelines in FASB
Codification of ASC 810 “
Consolidation”
which indicates “a legal entity that is deemed to be a business
need not be evaluated by a reporting entity to determine if the legal entity is a Variable Interest Entity (“VIE”)”
unless any one of four conditions exist:
-
|
The reporting entity, its related parties, or both participated significantly in the design or redesign of the legal entity;
|
-
|
The legal entity is designed so that substantially all of its activities involve or are conducted on behalf of the reporting entity and its related parties;
|
-
|
The reporting entity and its related parties provide more than half of the total of the equity, subordinated debt, and other forms of subordinated financial support to the legal entity; or
|
-
|
The activities of the legal entity are primarily related to the securitizations or other forms of asset-backed financings or single-lessee leasing arrangements.
|
A VIE is an entity that either (a) has insufficient
equity to permit the entity to finance its activities without additional subordinated financial support or (b) has equity investors
who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary
beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the
VIE. If we determine that we have operating power and the obligation to absorb losses or receive benefits, we consolidate the VIE
as the primary beneficiary, and if not, we do not consolidate. The Company has not identified any VIEs as of November 30, 2018.
Effective September 1, 2017, the Company changed
its method of computing amortization from a sales percentage method to the straight-line method for the intangible assets. An assessment
of useful life and / or discounted cash flow of the intangible asset is made and where the value is overstated the value is impaired.
The deferred tax assets or liabilities represent
the future tax benefits or cost of those differences. The Company’s principal deferred tax items arise from net operating
losses. Net operating losses approximate $25,442,000 which expire in the years 2030 through 2038. The net operating loss results
in a deferred tax asset of $3,816,000. As future earnings are uncertain, the Company has provided a valuation allowance for the
entire amount of the deferred tax asset.
The Company is required to evaluate the tax
positions taken in the course of preparing its tax returns to determine whether tax positions are “more likely than not”
of being sustained by the applicable tax authority “More likely than not” is defined as greater than a 50% chance.
The Company is delinquent on nearly all of its tax filings. As a result, there are presently no uncertain tax position and no reserves
for uncertain tax positions.
The Company has no unrecognized tax benefits
at February 28, 2018. The Company’s income tax returns are subject to examination by federal and state tax authorities. Due
to the failure to file its tax returns, all prior tax years are open to examination. The Company recognizes interest and penalties
associated with uncertain tax positions as part of the income tax provision and would include accrued interest and penalties with
the related tax liability in the balance sheet. There were no interest and penalties paid or accrued during the years ended February
28, 2018.
On March 17, 2017, MediHoldings, Inc. (“MediHoldings”),
a Colorado corporation, was formed as a wholly-owned subsidiary of the Company.
On June 27, 2017, MediSales (CA), Inc. (“MediSales”),
a California corporation, was formed as a wholly-owned subsidiary of the Company.
Both these subsidiaries as at November 30,
2018 had not traded and were inactive.
On September 18, 2018, with the merger with
Phoenix Life Sciences International Limited (Canada), the Company gained an Australian Incorporated subsidiary, Phoenix Life Sciences
(Australia) Pty Ltd.
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7.
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Related Party Transactions
|
Russell Stone
Mr. Russell Stone, the Company’s former
Chief Operating Officer, entered into a settlement agreement with the Company for unpaid services where he would be paid $125,000
over a maximum of 24 months. As at November 30, 2018, Mr. Stone was still owed $85,000.
Mr. Stone prior held approximately 14% of
the outstanding common shares of Phoenix Pharms Capital Corporation (PPCC) indirectly through a trust, prior to PPCC being sold
into Phoenix Life Sciences International Limited (a Canadian Corporation).
On September 22, 2018, the Company’s
Board of Directors accepted the resignation of Russell Stone from his position as a Director.
Martin Tindall
Mr. Martin Tindall join the Board as Chief
Executive Officer on October 3, 2018. Previous Mr. Tindall had assisted Company with business development activities through the
Advisory Services Agreement. Mr. Tindall serviced as CFO and a Director of Phoenix Pharms Capital Corporation, a director of Phoenix
Bio Pharmaceuticals Inc. and a director of Phoenix Life Sciences International Limited (a Canadian Corporation) which were all
vended into the Company on September 18, 2018.
Lewis “Spike” Humer
:
Mr. Lewis “Spike”
Humer was previously the interim Chief Executive Officer and a director of the Company. After the merger he stepped down from
an executive role but remains on the Board and has been appointed Non-executive Chairman. He also previously served as CEO
and a director of Phoenix Bio Pharmaceuticals and CEO and a director of Phoenix Pharms Capital Corporation, which were part
of the merger. A settlement agreement has been reached with Mr. Humer for unpaid services, prior to the merger where he would
be paid $125,000 plus $5,000 in unpaid expenses with the money to be paid over a maximum of 24 months and issued 100,000
common shares in the Company. Mr. Humer was owed $90,000 as at November 30, 2018.
On September 22, 2015, the Company amended
and restated its Articles of Incorporation to create and authorize four (4) classes of preferred stock. The Company has authorized
Series A, Series B, Series C and Series D Preferred Stock (the “Preferred Stock”).
Series A Preferred Stock:
Series A preferred shares have a par value
of $0.0001, and are convertible into common shares at $1.00 per common share. Series A preferred shares rank senior to common stock
with respect to the right to participate in distributions or payments in the event of liquidation, dissolution, or winding up of
the Company. Holders of Series A preferred shares are entitled to a preferred return equal to the purchase price paid for such
Series A preferred shares. Series A preferred shares do not have any voting rights.
Holders of Series A preferred shares are not
entitled to preemptive rights to purchase stock in future stock offerings of the Company. Holders of Series A preferred shares
have the right to register their unregistered stock when either the Company or another investor initiates a registration of the
Company’s securities, and they have the right of co-sale. Holders of Series A preferred shareholders are not required to
sell all of their Series A preferred shares on the same terms or conditions of a co-sale by a majority shareholder. There is no
right of first refusal for Series A preferred shares.
Series B Preferred Stock:
Series B preferred shares have a par value
of $0.0001, and are convertible into common shares at a rate of 100 common shares per preferred share. Series B preferred shares
are entitled to cast 500 votes for each preferred share owned. Series B preferred shares are senior to common shares with respect
to the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company,
and holders of Series B preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series
B preferred stock.
Holders of Series B preferred shares are entitled
to preemptive rights to purchase stock in future offerings, and have the right to register their unregistered stock when either
the Company or another investor initiates a registration of the Company’s securities. Holders do not have the right of co-sale,
and are not required to sell all of their Series B preferred shares on the same terms or conditions of a co-sale by a majority
shareholder. If any Series B preferred shareholder wishes to sell, transfer or otherwise dispose of any or all of their Series
B preferred shares, the other Series B preferred shareholders shall not have a prior right to buy such Series B preferred shares.
Series C Preferred Stock:
Series C preferred shares have a par value
of $0.0001, and are convertible into common shares at a rate of $1.00 per common share. Series C preferred shares are not entitled
to any voting rights, unless such vote is to modify rights, preferences, privileges and restrictions granted to and imposed on
Series C preferred shares. Series C preferred shares are senior to common shares and Series B preferred shares with respect to
the right to participate in distributions or payments in the event of any liquidation, dissolution, or winding up of the Company,
and holders of Series C preferred shares are entitled to receive a preferred return equal to the purchase price paid for such Series
C preferred, which is deemed to be $600,000. If the closing price per share of the Company’s common shares is less than $1.00
for a period of five consecutive trading days, the YP Holdings will have the one-time right, exercisable at its discretion, to
require that the conversion price of the shares become equal to 75% of the average closing bid price per shares for the five consecutive
trading days immediately preceding the date that YP Holdings notifies the Company that it wishes to convert some or all of its
Series C preferred shares into common shares. The reset shall not be available if the proceeds of the sale of converted common
shares equals or exceeds $750,000. Should proceeds of the sale of converted common shares equal or exceed $1,000,000, any unconverted
Series C preferred shares shall be returned to the Company for retirement. Converted common shares are subject to a leak-out agreement,
and no more than 50,000 common shares may be sold by YP Holdings in any one month.
Holders of Series C preferred shares are entitled
to receive a preferred return equal to 10% of the gross cash sales income received in the ordinary course of business. Holders
are not entitled to preemptive rights to purchase shares in future offerings of the Company.
Holders of Series C preferred shares have
the right to register their unregistered shares when either the Company or another investor initiates a registration of the Company’s
securities. Holders have the rights of co-sale, and are not required to sell all of their Series C preferred shares on the same
terms or conditions of a co-sale by a majority shareholder. If any Series C preferred shareholder wishes to sell, transfer, or
otherwise dispose of any or all of their Series C preferred shares, other Series C preferred shareholders shall not have a prior
right to buy such shares.
Series D Preferred Stock
Series D preferred shares have a par value
of $0.0001, and are convertible into common shares at a conversion rate of $1.00 per common share. Series D preferred shares rank
senior to common shares and the Series B preferred shares. In the event of any liquidation, dissolution, or winding up of the Company,
holders of Series D preferred shares shall be entitled to receive a preferred return equal to the purchase price paid for such
Series D preferred shares after payment of the preferred returns relating to the Series A and C preferred shares. Series D preferred
shares are not entitled to voting rights.
Holders of Series D preferred shares shall
be entitled to receive a preferred return equal to 10% of the Gross Cash Sales Income received in the ordinary course of business.
Upon issue of the dividend, the value of such shares shall be deemed to be retired. Holders of Series D preferred shares are not
entitled to preemptive rights to purchase stock in future offerings of the Company. Holders of Series D preferred shares have the
right to register their unregistered stock when either the Company or another investor initiates a registration of the Company’s
securities. Holders of Series D preferred shares have the right of co-sale, but they are not required to sell all of their Series
D preferred shares on the same terms or conditions of a co-sale by a majority shareholder.
As at February 28, 2018, Phoenix Bio Pharmaceuticals
Corporation held 2,000,000 Series B Preferred Shares. On September 21, 2018, the Company announced it had obtained consent from
the holder, Phoenix Bio Pharmaceuticals Corporation for the cancellation of 2,000,000 Preferred Series B shares in the Company
in connection with the restructure of the Company and merger with Phoenix Life Sciences International Limited, a Canadian Corporation
therefore there were no Series B Preferred Shares on issue at November 30, 2018.
As at February 28, 2018 and November 30, 2018
YP Holdings LLC had been issued 1,000,000 Series C Preferred Shares, but had converted 4,400 into common shares and therefore held
995,600 Series C Preferred Shares. However subsequently agreement was reached to cancel all outstanding Series C Preferred Shares.
The Company has authorized 990,000,000 shares
of its common stock, $0.001 par value. As at February 28, 2018 there were 34,171 shares of common stock on issue, respectively.
On April 4, 2018 the Company received a conversion
notice from its noteholder on the Typenex Note to convert principal on the Typenex Note into shares of the Company’s Common
Stock at a market price as defined by the Typenex Note. Accordingly the Company issued 900 shares at an issue price of $5.87.
On May 29, 2018 the Company issued 12,500
shares at $10.50 per share to Trevor Saliba as part of a settlement agreement as detailed below.
On September 24, 2018, the Company issued
30,502,375 shares of common stock bearing the restricted legend without registration (the “Issued Shares”). Of these,
29,802,375 shares were issued in reliance on Rule 802 under the Securities Act in a 1:1 share exchange related to the merger of
PLSI CA and the company as described above, and 700,000 shares were issued as compensation for services rendered in reliance of
Section 4(a)(2) of the Securities Act. A further 60,400 were issued as part of the merger in reliance on Rule 802 under the Securities
Act in a 1:1 share exchange related to the merger of PLSI CA All of the Issued Shares were issued in private transactions, and
the company received no proceeds from the Issued Shares.
On October 03, 2018, the Company agreed to
issue 48,000 shares of restricted common stock to KHAOS Media Group as compensation for services rendered in reliance of Section
4(a)(2) of the Securities Act for services previously rendered and invoiced between March and December 2014. A further 152,000
shares were issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act for services post
those dates.
As at November 30, 2018 there were 30,810,346
shares of common stock on issue.
As at November 30, 2018 and February 29, 2018
there were no common stock options on issue
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11.
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Convertible Promissory Note
|
On June 24, 2017, the Company entered into
a securities purchase agreement with Typenex Co-Investment, LLC, a Utah limited liability company. Under this agreement, the Company
has issued a secured convertible promissory note in the original principal amount of $1,105,000, deliverable in eleven tranches
(the “Typenex Note”). On the closing date, Typenex delivered the initial cash purchase price of $150,000, plus any
interest, costs, fees or charges accrued under the Typenex Note, including the original issue discount of $20,000. The outstanding
principal and accrued and unpaid interest on the Typenex Note is convertible at any time into shares of common stock at a conversion
price of $1.00, subject to adjustment as described below (the “Lender Conversion Price”). As of June 24, 2017, the
Company evaluated the Beneficial Conversion Feature under this note and determined as of June 24, 2017, there was no beneficial
conversion feature as the Lender Conversion Price exceeded the fair market value of the Company’s common stock.
As of November 30, 2017, the company has received
net proceeds of $135,000 related to this convertible promissory note, representing $150,000 less financing costs of $15,000. During
the nine months ended November 30, 2017 the Company has recorded interest expense of $7,725, and amortization expense of $554,413
related to the amortization of the original issue discount and the full-value of the warrant discussed below ($552,500).
Each subsequent tranche will be in the amount
of $85,000, plus any interest, costs, fees or charges accrued thereon under the terms of the Typenex Note, including the original
issuer discount of $8,500. Each tranche will be accompanied by its own secured investor note (the “Investor Notes”).
The Company has agreed to pay $5,000 to cover Typenex’s legal fees, accounting costs, due diligence, monitoring and other
transaction costs in connection with the purchase and sale of the Typenex Note. All loans received bear an interest rate of 10%
per annum. The loan is due 23 months after the initial cash purchase price is delivered to the Company. Typenex has pledged a 40%
membership interest in Typenex Medical, LLC to secure its obligations under all of the Typenex Notes.
A warrant to purchase shares of the Company
has been issued to Typenex as of June 24, 2017. This warrant grants Typenex the ability to purchase a number of fully paid and
non-assessable shares of the Company’s stock, par value $0.001, equal to $552,500 divided by the market price. This warrant
is issued pursuant to the terms of the securities purchase agreement as described above.
Provided there is an outstanding balance,
the Company will pay an installment amount equal to $61,388.89 plus any accrued and unpaid interest on the installment due date,
which is six months after the initial loan disbursement. This installment amount is the maximum that must be paid on any given
installment due date, and is limited by the amounts owed. This amount can be converted at the lesser of either the lender conversion
price or at 70% of the average of the three lowest closing bid prices in the 20 trading days immediately preceding the applicable
conversion. Should the average trading price be less than $0.35 during any such period, then the conversion factor will be reduced
to 65% for all future conversion, additionally the conversion price will be reduced by 5% if the Company’s common stock is
not available for DWAC. Should the Company decide to prepay this amount, there is a prepayment premium equal to 125% of the outstanding
balance of the Typenex Note. Should the prepayment premium not be paid within 2 days of the prepayment notice, the Company forfeits
its right to prepay the Typenex Note.
Under this agreement, Typenex has the right
at any time after the purchase price date until the outstanding balance has been paid in full to convert any or all of the outstanding
balance into shares of the Company’s common stock under the following formula: the number of shares issued equals the amount
being converted divided by $1. These shares must be delivered to Typenex within three trading days of the conversion notice being
given to the Company. Should any shares be sold to Typenex or any third party at a value that is less than the effective lender
conversion price, then the lender conversion price will be reduced to equal such lower issuance price. The effective lender conversion
price will also be adjusted as needed upon any forward or reverse split of the Company’s shares. Should the Company fail
to deliver the shares in a timely manner, a late fee of the greater of $500 per day and 2% of the applicable lender conversion
share value rounded to the nearest multiple of $100 will be assed for each day after the third that the Company is late (though
not exceeding 200% of the applicable lender conversion share value.
In the event of a default, the Typenex Note
may be accelerated by Typenex by providing written notice to the Company. The outstanding balance is immediately due and payable
at the greater of the outstanding balance divided by the installment conversion price, or the default effect, which is calculated
by multiplying the conversion eligible outstanding balance by 15% for each major default or 5% for each minor default and then
adding the resulting product to the outstanding balance as of the date of default. In addition, an interest rate of the lesser
of 22% per annum (or the maximum rate permitted under law) will be applied to the outstanding balance. Typenex is prohibited from
owning more than 4.99% of the Company’s outstanding shares, unless the market capitalization of the Company’s common
stock is less than $10,000,000, in which case Typenex is prohibited from owning more than 9.99% of the Company’s outstanding
shares.
On a date that is 23 trading days from each
date that the Company delivers conversion shares to Typenex, there is a true-up date in which the Company will deliver additional
shares if the installment conversion price on that date is less than the installment conversion price used in the applicable installment
notice. These additional shares will be equal to the difference between the number of shares that would be delivered to Typenex
at the time of the true-up date and the amount originally delivered.
Notice of Default
– On January
9, 2015, the Company received a Notice of Default from Typenex under the Convertible Promissory Note described in Note 12 above.
In the letter, the noteholder described two major defaults where the Company failed to meet its obligations under the Typenex Note.
The first default was triggered on December 16, 2017 related to a request from the noteholder to increase the number of shares
reserved for issuance under the Typenex Note on the books of the Company’s transfer agent. The second default was triggered
on December 27, 2017, when the Company failed to make its first installment payment of $61,888.89 according to the terms of the
Typenex Note. Each default triggered a penalty of 115% of the then outstanding principal and accrued and unpaid interest and triggers
the interest rate to 22%. As of January 9, 2015, the outstanding principal, accrued interest and accrued penalties on the Typenex
Note was $239,483.61. On January 23, 2015, the Company satisfied its first default by instructing its transfer agent to reserve
a total of 50,925,000 shares of common stock covering the potential conversion of the original principal value of the Typenex Note
($1,100,000) plus common shares issuable upon the exercise of warrants underlying the Typenex Note. On February 12, 2015, the Company
received a notice from Typenex waiving the penalties on the December 16, 2017 default and waived $26,755.16 of penalties imposed
on December 16, 2017. Under the terms of the Typenex Note, the Lenders Conversion Price will reset to 60% of the average of the
three lowest closing bid prices of the Company’s common stock in the 20 days prior to conversion. As of December 16, 2017,
the Company has re-evaluated the beneficial conversion feature under the Typenex Note and has recorded a liability for the beneficial
conversion feature totaling $230,392. This discount will be amortized over the remaining life of the Typenex Note.
On February 3, 2015, the Company exercised
its borrower offset right under the Typenex Note. Through this offset right, the Company is entitled to deduct and offset any amount
owing by Typenex under the initial securities purchase agreement dated June 24, 2017 from any amount owed by the Company under
the note. The combined balance of the secured investor notes and the investor notes as of the January 28, 2015 offset date was
$890,800. In addition, the note balance prior to the offset included $85,000 of unearned original issue discounts.
In conjunction with the Company’s
exercise of its offset right, the Company and Typenex each hereby acknowledge that the secured investor notes and the investor
notes were offset against the Company balances owed under the note as of the offset date, and as a result thereof, each of the
secured investor notes and the investor notes is deemed to have been paid in full and are now cancelled and terminated and the
Company balance owed under the note has been reduced to $218,028.47 as of the offset date. Additionally, the Company specifically
acknowledges that Typenex has no further obligations under any of the secured investor notes and investor notes.
Further, the Company acknowledges that
the investor pledge agreement, dated June 24, 2017, and all security interests granted thereunder with respect to the collateral
(as defined in the investor pledge agreement) have terminated and all such security interests shall be deemed released.
Notice of Conversion
– Between
August 31, 2018 and November 30, 2018 the Company has received no conversion notices from its noteholder on the Typenex Note to
convert principal on the Typenex Warrant into shares of the Company’s Common Stock at a market price as defined by the Typenex
Note.
On or about June 24, 2017, the Company entered
into a Convertible Promissory Note with a face value of $1,105,000 (the “Note”) by and between the Company and Typenex
Co-Investment, LLC (“Typenex”).
On or about April 19, 2018, the Phoenix Life
Sciences International Ltd, a Canadian Corporation (“PLSI CA”) acquired the entirety of the Notes outstanding principal
and interest balance from Typenex. Upon the completion of the merger, that Note was conveyed to the Company.
On September 22, 2018, the Company’s
Board of Directors resolved to deem the acquired Notes principal balance satisfied, and to terminate the Note and any and all rights
and obligations arising thereunder, including without limitation the cancellation of all outstanding Warrants issued to Typenex
under the Note. This also meant that the derivative liability carried on the balance sheet was retired.
NMS Advisors were previously engaged as the
Investment Bankers for the Company. In May 2019, the Company issued 12,500 shares at $10.50 to settle any potential claims against
the Company for these services and NMS provided full release of the Company from any claims. Trevor Saliba, as principal of NMS
Advisors instructed the Company that the shares be issued in his name directly. The release included the Company, previous and
future officers and successors.
As part of the merger and consolidation, Phoenix
Life Sciences International Limited (Canada) and Phoenix Life Sciences International Limited (Nevada) entered into settlement agreements
with former investors, employees and contractors whereby their debt, shares held in entities subject of the consolidation, or outstanding
amounts were settled in exchange for a full release of claims and the Company issuing approximately eight (8) million shares and
the assumption of approximately $2 million of settlements payable. The purpose of the consolidation, in addition to providing the
deemed necessary relationships and contracts for the Company to execute on its strategy, was to settle any potential claim or liability
to ensure that the Company was not subject to any claims by former investors, employees and contractors.
Issuance of Common Stock
: On December
4, 2018, the Company issued 229,600 common shares as part of settlement agreements.
Issuance of Common Stock
: On December
17, 2018, the Company issued 675,028 common shares which included 191,668 common shares as part of settlement agreements and 483,360
common shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
Issuance of Common Stock
: On January
11, 2019, the Company issued 500,600 common shares to YP Holding, LLC. as part of a settlement agreement which included cancellation
of 1,000,000 Series C Preferred Shares.
Issuance of Common Stock
: On January
15, 2019 the Company issued 54,580 common shares which included 53,500 common shares as part of settlement agreements and 1,080
common shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act.
Appointment of a Director
: On February
20, 2019 the Board of the Company appointed Michael Gobel, who has long and distinguished career in corporate finance in Australia,
as a non-executive Director.
Issuance of Common Stock
: On February
26, 2019 the Company issued 315,928 common share which included 5,460 common shares as part of settlement agreements, 126,750 common
shares issued as compensation for services rendered in reliance of Section 4(a)(2) of the Securities Act and 183,718 for cash consideration.
Issuance of Common Stock
: On April
2, 2019 the Company issued 151,216 common share for cash consideration.
Issuance of Common Stock
: On April
25, 2019 the Company issued 100,000 common share for cash consideration.
Capital Raising
: On April
30, 2019 the Company announced that it intended to raise up $40,000,000 from professional investors. The Company will file a
Form D with SEC for a 506c capital raise.
Issuance of Common Stock
: On May 1,
2019 the Company issued 155,452 common share which included 137,523 common shares issued as compensation for services rendered
in reliance of Section 4(a)(2) of the Securities Act and 17,929 for cash consideration.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Overview
The Company was incorporated in the
State of Nevada on April 21, 2009, under the name Mokita Exploration, Ltd. On February 5, 2010, the Company filed a
Certificate of Amendment to the Articles of Incorporation changing our name to Mokita, Inc. On February 27, 2017, there was a
change of control of the Company. On February 28, 2017, our board of directors and a majority of holders of the
Company’s voting securities approved a change of name of the Company to MediJane Holdings Inc. A Certificate of
Amendment to effect the change of name was filed and became effective with the Nevada Secretary of State on March 4, 2017. A
Certificate of Correction was subsequently filed with the Nevada Secretary of State on March 6, 2017 to correct a spelling
error in the Company’s new name. These amendments have been reviewed by FINRA and were approved for filing with an
effective date of March 10, 2017. The name change became effective with the Over-the-Counter Bulletin Board at the opening of
trading on March 10, 2017 under our new ticker symbol “MJMD”.
On March 8, 2017, the Company filed an Amendment
to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result of the Amendment,
the Company has changed its name with the State of Nevada from MediJane Holdings, Inc. to Stem Bioscience, Inc.
Subsequently, on May 31, 2018, the Company
filed an Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada. As a result
of the Amendment, the Company has changed its name with the State of Nevada from Stem Bioscience, Inc. to Phoenix Life Science
International Limited. The name change became effective with the Over-the-Counter Bulletin Board on November 2, 2018 with the symbol
changing to “PLSI”.
After the change of control on February 27,
2017, the Company became a medical delivery systems company with a pharmaceutical approach to cannabinoid treatment of various
illnesses with medical cannabis.
Recent Developments
With the merger by and between Phoenix Life
Sciences International Limited, a Nevada Corporation (the “Company”) and Phoenix Life Sciences International Limited,
a Canadian Corporation (“PLSI CA”), whereby the Company completed its merger with PLSI CA on September 18, 2018, with
the Company as the surviving entity, the Company will continue to pursue a pharmaceutical approach to cannabinoid treatment of
various illnesses with medical cannabis.
On October 10, 2018, the Company announced
it had received approval from the Vanuatu Investment Promotion Authority (VIPA) to establish operations in the Republic of Vanuatu
and manufacture botanical pharmaceutical products.
The Company’s focus is on creating
healthcare solutions with a specific focus on the use of cannabinoids to manage a broad range of health conditions, both generically
and through our proprietary formulations. We are focused on establishing farming operations and pharmaceutical manufacturing laboratories
using specific strains of the cannabis sativa plant and other cannabinoids as a base element in the range of products produced
and sold. Our goal is to research, produce, and distribute products around the globe that target and treat; diabetes, cancer, pain,
autoimmune, psychological, neurological, and sleep disorders. These categories include conditions that affect hundreds of millions
of patients worldwide.
The initial products that Phoenix Life
intends to manufacture and distribute is Phoenix Metabolic. Extracted from specific strains of cannabis sativa, Phoenix Metabolic
has been developed to provide a safe, non-toxic and efficacious way to manage blood sugar levels and diabetic complications. This
is based on mounting levels of data supporting the use of cannabinoids in the management of diabetes and clinical experience of
Phoenix Life’s U.S. Diabetes Director.
We plan to build an integrated
healthcare organization by creating products and programs using emerging biological products such as cannabinoid plant extracts.
We intend to deliver these programs through managed agriculture, pharmaceutical production, physician education and national networks
of community clinic and dispensing pharmacies, combined with wholesale and distribution networks. Leading formulators have developed
a range of pharmaceutical-grade products from the cannabis plant. The Company will utilize its intellectual property in extraction
technology, proprietary compounds, delivery systems, and distribution to produce high-quality products in terms of control, consistency,
accountability, and packaging.
We anticipate that our delivery
systems will include oral soft gel capsules, thin film dissolvable strips, transdermal patches, sublingual oral sprays, suppositories
and topical creams.
We initially intend to produce our products,
in the Republic of Vanuatu, using cannabinoids derived from various strains of cannabis sativa. Several of these strains may be
classified as Industrial hemp. Industrial Hemp has been defined, accordingly, as an exclusion/exception to the Controlled Substances
Act (“CSA”), as, “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9
tetrahydrocannabinol (“THC”) concentration of not more than 0.3 percent on a dry weight basis.” Although it is
clear that marijuana, or “marihuana,” is a Schedule I controlled substance under the CSA, not all parts of the Cannabis
sativa L. plant are considered “marihuana” under the federal definition. Moreover, as set forth in the Agriculture
Act of 2016 (commonly known as the Farm Bill), the entire industrial hemp plant is lawful and is not subject to the CSA.
Phoenix Life’s Vanuatu
operation is licensed as a pharmaceutical manufacturer and following completion of legislation, be licensed for cultivation
and export of cannabis derived products. While, the United States maintains cannabis sativa, and specifically THC as a
Schedule 1 Controlled Substance, the Republic of Vanuatu has joined over forty-five (45) countries, including Canada,
Australia, New Zealand and the United Kingdom in legalizing cannabis for medical use.
Our business strategy includes providing
capital to a series of fully or partially owned laboratories and ventures with medical professionals, researchers, cannabinoid
related projects and pharmacists. We will provide access to intellectual property and distribution networks, plus a range of services
that will include the following: preparing the legal framework, purchasing of real estate, building of production facilities, community
clinics and dispensing pharmacies and retail outlets as well as operating of health and wellness centers.
We believe that we are positioned to earn
revenue through the sales of products through supplying products and services to national healthcare systems, doctors’ offices,
pharmacies, ecommerce and our community clinic and dispensing pharmacy network and leveraging the high margins created between
being a pharmaceutical producer, growing and manufacturing in equatorial developing national and being part of the world’s
fastest growing industry – medical cannabis.
Consolidated Results of Operations
The results of operations for the
three and nine months ended November 30, 2018 represent results of the business as a healthcare solutions and pharmaceutical
manufacturing distribution company, focused on products derived from the cannabis plant.
Revenues for the three months ended November
30, 2018 and 2017 were $0. Revenues for the nine months ended November 30, 2018 and 2017 were $0.
Cost of sales for the three months ended November
30, 2018 and 2017 were $0. Cost of Sales for the nine months ended November 30, 2018 and 2017 were $0.
Product development expense for the three
ended November 30, 2018 and 2017 were $0. Product development expenses for the nine months ended November 30, 2018 and 2017 were
$0.
Sales and marketing expenses for the three
months ended November 30, 2018 and 2017 were $0. Sales and marketing expenses for the nine months ended November 30, 2018 and 2017
were $0. Sales and marketing expenses have been curtailed due to the lack of funds.
Operations
expenses for the three months ended November 30, 2018 and 2017 were $1,401,801 and $0, respectively. Operations expenses for the
nine months ended November 30, 2018 and 2017 were $1,401,801 were $0, respectively.
General and administrative expenses for the
three months ended November 30, 2018 and 2017 were $57,233 and $30, respectively. General and administrative expenses for the nine
months ended November 30, 2018 and 2017 were $57,278 and $406, respectively. General and administrative expenses generally include
costs for running the Company’s administrative office. Costs have increased as the Company seeks to rejuvenate.
Professional fees for the three months ended
November 30, 2018 and 2017 were $152,939 and $0, respectively. Professional fees for the nine months ended November 30, 2018 and
2017 were $152,939 and $0, respectively. Professional fees consist of cost of financing, legal, accounting, consulting and advisory
services. Again as the Company is now active, professional fee expenses have risen.
Lease operating expenses for the three months
ended November 30, 2018 and 2017 were $0. Lease operating expenses for the nine months ended November 30, 2018 and 2017 were $0.
Other income and expenses for the three months
ended November 30, 2018 and 2017 were net expense of $1,275,790 and $314, respectively. Other income and expense for the nine months
ended November 30, 2018 and 2017 were a net expense of $1,710,610 and a net income of $187,505, respectively. The increase in other
expenses in the 2018 periods from the 2017 periods are due to non-cash expenses related to settlement costs to various parties.
Net
loss for the three months ended November 30, 2018 and 2017 was $2,887,763 and $344, respectively. Net loss for the nine months
ended November 30, 2018 was $3,322,628 and a net profit for 2017 of $187,099. The loss in 2018 was primarily due to settlement
costs and services, both of which were paid using common shares.
Liquidity and Capital Resources
At November 30, 2018, the Company had a cash
balance of $6,923 compared with $697 at February 28, 2018. The increase in cash was cash raised through share issues.
Cash flow from Operating Activities
.
During the nine months ended November 30, 2018 and 2017, the Company used $549,442 and $406, respectively, in cash for operating
activities for its current operations.
Cash flow from Investing Activities.
During the nine months ended November 30, 2018 and 2017, the Company received $0 for investing activities.
Cash flow from Financing Activities.
During the nine months ended November 30, 2018 and 2017, the Company received $555,668 and $0 from financing activities, respectively.
Majority of the cash raised through financing activities was from common share issues.
Going Concern
We have not attained profitable operations
and are dependent upon the commencement of the sale of our products and obtaining financing to increase the production and development
of our products. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial
doubt that we will be able to continue as a going concern without further financing.
Future Financings
We will continue to rely on equity sales of
our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution
to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for
debt or other financing to fund planned acquisitions and exploration activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying
notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.
We regularly evaluate the accounting policies
and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to
our financial statements. In general, management’s estimates are based on historical experience, on information from third
party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual
results could differ from those estimates made by management.
Use of Estimates. The preparation of financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related
to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s
estimates. To the extent there are material differences between the estimates and the actual results, future results of operations
will be affected.
Stock-based Compensation. The Company records
stock-based compensation in accordance with ASC 718,
Compensation – Stock Based Compensation
and ASC 505-50 -
Equity-Based
Payments to Non-Employees
. All transactions in which goods or services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable.
Revenue Recognition.
The Company adopted ASC 606 using the modified
retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after
January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP.
The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative
effect adjustment was recorded.
Recent Accounting Pronouncements
The recent accounting pronouncements did not
have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results
of operations.
Contractual Obligations
As a “smaller reporting company”,
we are not required to provide tabular disclosure obligations.